How to conduct proper due diligence for your property in Hungary

Last updated on December 18, 2023

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Everything you need to know is included in our Hungary Property Pack

Buying a property in Hungary is a substantial and potentially life-changing decision that should not be taken lightly.

Whether you are in pursuit of a new home, an investment opportunity, or a charming vacation retreat, stepping into the world of Hungarian real estate can be an invigorating endeavor.

Nevertheless, it is imperative to approach this process with caution and thorough consideration. Conducting diligent due diligence is a fundamental step in the property acquisition journey that should never be underestimated.

In this article, we will delve into the importance of due diligence when buying a property in Hungary. We will shine a light on the crucial factors and considerations that every prospective buyer should be well-informed about. From understanding legal regulations to carrying out meticulous property inspections, we aim to provide you with invaluable insights to ensure that your real estate investment in Hungary is not only thrilling but also secure.

Finally, please know that the full due diligence cheklist is included in our property pack for Hungary.

What is a due diligence when you buy a property in Hungary?

In Hungary, when you're buying a residential property, due diligence is a crucial step.

It's essentially a thorough investigation of the property you're interested in buying. This process is not mandated by law, but it's highly recommended to ensure you're making a sound investment and to avoid potential legal and financial problems later on.

Due diligence involves checking the legal status of the property. This includes verifying the title deed to ensure the seller actually owns the property and that there are no undisclosed liens or encumbrances.

You'll also want to check the property's history, like past sales or any legal disputes it might have been involved in.

Another key aspect is examining the physical condition of the property. This could mean hiring a professional to conduct a building inspection to identify any structural issues, pest infestations, or other potential problems that might not be immediately apparent.

Financial due diligence is also important. This involves assessing any financial obligations tied to the property, like utilities, property taxes, or community fees.

It's crucial to know these expenses upfront to avoid surprises after the purchase.

Typically, the buyer is responsible for carrying out due diligence, but you can hire professionals like lawyers, real estate agents, or surveyors to help you with different parts of the process. It's wise to start this process as soon as you're seriously considering a property.

The time it takes can vary.

Simple transactions might only take a few weeks, while more complicated cases, especially if there are legal issues or disputes, could take several months. There's no standard duration.

And ... yes, due diligence does cost money. Professional fees for lawyers, surveyors, or inspectors can add up.

However, these costs are generally seen as a worthwhile investment to safeguard against future complications.

Get the full checklist for your due diligence in Hungary

Don't repeat the same mistakes others have made before you. Make sure everything is in order before signing your sales contract.

What to check during a due diligence in Hungary?

We'll give here a very brief overview of the elements you have to check when you conduct a due diligence in Hungary ; if you want a full checklist, please check the "Due Diligence" document in our property pack for Hungary.

In Hungary, when you're buying a house or an apartment, you'll want to be thorough with your due diligence to avoid any surprises.

Here's a breakdown of what you need to do.

First off, checking property titles is key.

In Hungary, this is done through the Land Registry, known as Földhivatal. This is where you'll find information about the ownership, any mortgages, or liens on the property. It's often in Hungarian, so getting a local lawyer to help might be a good idea.

Then there's the local regulations.

Every area in Hungary might have different rules about building or using properties. You'll need to visit the local municipal office to find out what applies to your property. This can include things like whether you can add an extension or if there are protected trees in the garden.

Financial due diligence is next.

You need to know about any financial ties to the property, like unpaid taxes or utility bills. Also, check if there are any outstanding mortgages that might affect your purchase.

Environmental assessments aren't always required in Hungary for residential properties, but they can be important. If the property is near a factory or used to be an industrial site, you might want to check for soil contamination or other environmental issues.

Building inspections are not mandated by law in Hungary, but they're definitely a good idea.

Hire a professional to check the property for structural problems, electrical issues, or any hidden defects. This can save you a lot of trouble and money in the long run.

Utilities are crucial too.

You need to make sure the property has access to water, electricity, gas, and sewage. These can usually be confirmed by checking with the local utility companies or through the seller.

Researching the neighborhood is more about your personal preference and lifestyle needs. Look into things like schools, public transport, crime rates, and local amenities. A simple way to do this is to visit the area, talk to locals, or join local social media groups.

Understanding easements or rights of way is vital. These are legal rights that allow others to use a part of your property for a specific purpose, like a shared driveway.

The Land Registry should have this information, but again, a lawyer can help you understand what this means for you.

For future development plans, you'll need to check with the local municipal planning office. They can tell you about any upcoming projects in the area that might affect the property's value or your quality of life, like new highways or commercial developments.

Lastly, checking for historical listings or disputes is about understanding the property's past. The Land Registry can provide some information, but you might also need to do some detective work, like talking to neighbors or checking local archives.

Everything you need to know is included in our Hungary Property Pack

What's the process and who are the professionals involved in a property due diligence in Hungary?

In Hungary, when you're buying a property, there are a few key professionals you should consider involving in the due diligence process.

Each of these professionals plays a distinct role and is regulated by specific Hungarian laws and regulations.

First, a lawyer is almost essential. They will help you navigate the legal complexities of the property transaction.

Lawyers in Hungary are regulated by the Hungarian Bar Association, ensuring they adhere to professional standards and ethics. Your lawyer will check the legal status of the property, interpret the Land Registry's information, and assist in contract negotiations. They can also help in understanding any easements or rights of way that may affect the property.

Then, you might want a surveyor, especially if you have concerns about the physical condition of the property.

Surveyors in Hungary evaluate the structural integrity of buildings and can identify potential issues that might not be visible during a casual inspection. They are usually members of professional bodies like the Chamber of Hungarian Architects and Engineers, which ensures they meet professional standards.

For foreigners, language and communication barriers can indeed make the process more challenging.

It's crucial to have professionals who can communicate in a language you're comfortable with. This could mean finding a lawyer or real estate agent who speaks English or your native language. They can help translate and explain complex legal and technical terms, ensuring you fully understand every aspect of the transaction.

Regarding contract amendments, in Hungary, once a property sale contract is signed, making amendments isn't straightforward. Both parties – the buyer and the seller – must agree to any changes, and these amendments must be in writing.

It's crucial to get everything right before signing, as changes later can be complicated and might require additional legal assistance.

The timeframe for completing all the necessary paperwork and approvals after signing the contract can vary.

Typically, it can take several weeks to a few months. The time depends on several factors, including the complexity of the property's legal status, any issues identified during the due diligence process, and the efficiency of the local land registry and other government offices involved in the transaction.

A mistake in your due diligence could cost you thousands of dollars

Make sure you don't overlook critical checks when assessing the condition of your prospective property purchase. Avoid legal complications. Stay prepared, get our comprehensive guide.

What are the common pitfalls happening during a property due diligence in Hungary?

After our research and the feedback collected from our local real estate partners, we have written an article about the risks and pitfalls when buying a property in Hungary.

In Hungary, when you're buying a property, there are unique risks and pitfalls you should be aware of, especially as a foreigner.

Understanding these can help you navigate the process more smoothly.

One unique aspect in Hungary is the complexity of property rights due to the country's historical context. For instance, restitution claims stemming from historical events, such as changes in government, can complicate property titles. This means that sometimes, property ownership can be contested long after a sale has been completed.

It's not unheard of for buyers to find themselves entangled in legal disputes over property rights that have their roots in historical events.

Foreigners often face additional challenges, such as language barriers and unfamiliarity with local laws and regulations.

Real-life examples include misunderstanding contract terms due to language differences, leading to unexpected obligations or liabilities. Moreover, cultural nuances in business and negotiation practices can also lead to misunderstandings.

Specifically, in Hungarian law, there are nuances in property transactions that differ from other jurisdictions. For example, the role of the vételi ajánlat (purchase offer) and the adásvételi szerződés (sales contract) in property transactions is critical, and misunderstanding these can lead to legal issues.

The purchase offer, once accepted, can be legally binding, and withdrawing from it without valid reasons can have legal consequences.

In contracts, a common pitfall is not thoroughly understanding or identifying all encumbrances on the property. This can include undisclosed debts, liens, or even rights of use by third parties. Thorough due diligence and legal assistance can mitigate these risks.

Regarding property insurance, it's not mandatory in Hungary, but it's highly recommended. Standard insurance policies cover risks like fire, theft, and natural disasters.

Additionally, liability insurance is advisable, especially if the property is to be rented out.

In case of a dispute, legal avenues in Hungary include litigation and arbitration.

The first step is usually to try to resolve the issue through direct negotiation. If that fails, the matter can be taken to court. In Hungary, the civil courts (polgári bíróságok) handle property disputes.

Alternatively, arbitration, which can be faster and more flexible than court proceedings, is handled by bodies like the Permanent Arbitration Court (Állandó Választottbíróság) attached to the Hungarian Chamber of Commerce and Industry.

To settle disputes, local authorities like the district courts (járásbíróságok) or the Land Registry can be involved, especially in cases related to property titles or registration issues.

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